The unparalleled joy-ride of commodities has hit a road bump in recent months, thanks to the meteoric fall in commodity prices, inflicted by the global recessionary trend and the consequent decline in demand.

When BHP Billiton, the world's largest mining company, abandoned its yearlong hunt for Rio Tinto, a rival Anglo-Australian mining giant, it looked surprising, at least at first peek. Had the deal gone through, it would have virtually created a monopoly of BHP-Rio duo and Vale of Brazil, by providing them a control to a whopping three-fourth of the market for seaborne iron-ore. Marius Kloppers, the ambitious CEO of BHP, was very much hopeful of clinching the deal and he even dubbed the deal as "a deal for all seasons". Even customers across the globe were apprehensive that this concentration would leave predatory pricing power in the hands of a few firms. However, on November 25^th, last year, after months of counting the pros of the agreement and battling painstaking antitrust investigations by the European Union, BHP suddenly decided to pull out. Though, apparently it looked surprising, but a deeper introspection unveils the strong reasons behind the Melbourne-based BHP's decision to quit. In fact, within a spate of few months, things have completely changed and the commodities juggernaut of the past seven years has moved into reverse gear, thanks mainly to the impending recessionary threat across the globe and the consequent erosion of demand for commodities.

When BHP revealed its plan to acquire Rio, commodity prices were scaling new peaks and Standard & Poor's 500 Index was mounting high. Even at one point of time, the remarkable rise in the index propelled the all-share bid value for Rio to cross $190 bn, which would have made the deal one of the biggest mergers in history. But it was indeed a rapid reversal of fortunes in the mining industry that by the time BHP decided to abandon its hostile bid for the world's third largest mining company, Rio, the value of its bid had shrunk to $66 bn. At the time of pulling out, Kloppers was confronting a more than 50% decline in copper prices and nearly 50% drop in oil prices, as the world's developed economies, including US, were battling their first simultaneous recession since World War II; justifiable enough for BHP to opt out of the deal.

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